ACC 220 Week 6 CheckPoint - ACC/220 Week 6 Checkpoint 7 How...

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ACC/220 Week 6 Checkpoint 7. How should mixed costs be classified in CVP analysis? What approach is used to affect the approach? They mixed costs should be broken down into a fixed variable portion. A brief high/low calculation is often enough, depending on the sensitivity. Other times, it may be more beneficial to do a full regression analysis. You might need to make an educated guess on the cost driver. A scatter gram will show you whether there is a linear relationship between the activity and the cost. One approach would be to determine the variable and fixed components each time that mixed cost is incurred. But due to time and cost restraints, the approach is rarely followed. Another approach is to determine variable and fixed costs on an aggregate basis at the end of a period of time such as quarterly or end of the year. This is done by using past experience with the behavior of the mixed costs during various levels of activity.
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